- Infosys shares fell 4.1% after cutting FY27 revenue growth forecast to 1-2% constant currency
- September quarter revenue rose 1.5% YoY to $5,145 million, with operating margin steady at 21%
- Infosys won $5.2 billion in deals, with AI revenue up 29% to 10.5% of total revenue
Shares of Infosys fell as much as 4.1% to Rs 1,107 on the NSE on Monday, after the company cut its FY27 revenue growth forecast with its September-quarter results on Friday. The stock clawed back most of that loss and was trading at Rs 1,150.25 at about 2:30 pm, down 0.31%.
The Nifty IT index followed a similar path. It dropped about 2.5% in early trade before recovering most of that ground by late morning. The fall came days after the index had its strongest week since 2008.
Infosys now expects FY27 revenue to grow 1-2% in constant currency, down from the 1.5-3% range it gave in July. It kept its operating margin forecast at 20-22%.
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The September quarter itself was mixed, with revenue coming in at $5,145 million, up 1.5% from a year earlier and 1.2% from the previous quarter in constant currency. Operating margin held steady at 21%, and earnings per share rose 8.7% year on year to Rs 19.32, though free cash flow fell 8.1% to Rs 8,898 crore.
The brighter spots were deals and AI, as Infosys won $5.2 billion of large deals, 62% of it new business, including one mega deal worth more than $2 billion. Its AI-related revenue grew 29% from the previous quarter and now makes up 10.5% of the total.
In other words, the order book and the AI business are growing, but the company sees less top-line growth this year than it did three months ago.
Rupee's Flattering Effect
The currency angle shows up clearly in Infosys' own filing. Measured in rupees, revenue rose 10.7% from a year earlier to Rs 49,244 crore. Strip out currency movements, and growth was just 1.5%.
That gap of roughly nine percentage points is the currency effect, and a sharply weaker rupee is a big part of it. The rupee was trading near 95 to the dollar on Monday. For IT exporters, which earn mostly in dollars and spend largely in rupees, that lifts reported revenue and can support margins, without any extra work being won.
A Rally That Ran Hard
The currency tailwind was only one part of IT's recent run. The Nifty IT index gained about 11.7% in the week to October 16, its best week since 2008, and rallied roughly 16% over the month to October 23.
Most of that was driven by results that beat low expectations. TCS reported a 15% rise in quarterly profit, HCLTech booked a record $3.3 billion of new deals and raised the lower end of its FY27 growth forecast, and Tech Mahindra's profit rose about 33%. Investors also moved money into Indian IT as global AI and chip stocks sold off sharply.
Against that backdrop, Infosys' cut breaks from the upbeat tone set by TCS and HCLTech.
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Bubble, Or A Rebound From Deep Lows?
A 16% gain in a month is steep for a sector whose biggest names are guiding to low single-digit growth. Part of the rally was a rotation trade, money leaving global AI and chip stocks, and such flows can reverse quickly. The currency boost can fade too, as the rupee is already about 2% stronger than its record low of 96.96 per dollar hit in May. And Infosys' cut is a reminder that client spending remains cautious.
Even after the run-up, the Nifty IT index is about 21% below its 52-week high of 40,301. Infosys is about 33% below its own 52-week high of Rs 1,728 and trades at roughly 15 times trailing earnings, according to Google Finance data. Its deal wins are strong, and its AI revenue is growing fast. Emkay Global has reportedly kept a Buy rating on the stock with a Rs 1,300 target, about 13% above Monday's price.
On the numbers, the IT rally looks more like a sharp rebound from deeply depressed levels than a bubble. But it was a rebound built partly on currency gains and global fund flows, which Infosys' results show cannot substitute for faster growth.
For Infosys, the close will be telling. If the stock holds its recovery, it would suggest investors see the guidance cut as a company-specific setback rather than a warning for the whole sector.
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